I was in Austin last week for the Texas Book Festival. I spent days getting valuable input on how to convince people to make cities more inclusive. While Austin has as powerful anti-apartment homeowner groups of any city, the route to winning majority political support for ending exclusionary zoning laws even in that city became clear.

I spoke at the Festival and also at an event at the University of Texas because I have a chapter on Austin in my new book, Generation Priced Out: Who Gets to Live in the New Urban America. I describe Austin’s “dark side” of tenant displacement and lack of code enforcement, as well as the powerful homeowner groups who rely on exclusionary zoning to bar new apartments despite rising housing costs.

Austin residents, like those in Seattle, were accustomed to affordable housing. But those days are leaving Austin, and the question is how the city should respond.

A Clearly Defined Path

I recount in my book how urbanist groups like AURA, progressive politicians like City Councilmember Greg Casar, and Mayor Steve Adler support building more housing. Homeowner groups vigorously oppose this, and are running their champion against Adler in the November mayoral election.

But here’s what became clear to me after talking to people with sharply different views on Austin’s future: the support for greater inclusion is there, but people need a clearly defined path toward achieving it.

Unfortunately for the pro-housing side, Austin just spent three years on a very undefined path toward inclusion. It was a massive proposed zoning revision with the mysterious name, “CodeNEXT.”

I compare CodeNEXT to San Francisco’s failed 2016 “Affordable Housing Density Bonus” measure, which aroused so much opposition that it was pulled prior to a Board of Supervisors vote. Revived in 2017 under the new name HOME-SF, virtually the same measure passed unanimously.

In talking to a lot activists and others in Austin, it became clear to me that most people are willing to support more housing, even if it means legalizing triplexes or fourplexes in single-family zoned neighborhoods. That this has not yet happened in most cities is primarily due to two reasons.

First, a powerful political minority has taken advantage of the silent majority’s lack of pro-housing advocacy.They dominate local land use meetings and vote in far higher percentages than those victimized by the housing crisis.

Second, homeowners open to housing have fears about “the end game” that could be diffused by a clearly defined path. The vague terms “Affordable Housing Density Bonus” or “CodeNEXT” heightens such fears.

Minneapolis (see Neighbors for More Neighbors) and Portland (see Portland for Everyone) are making progress on expanding triplexes and fourplexes in single family neighborhoods because they have mobilized grassroots support and their housing programs are clear (pro-housing activists turned out in force yesterday for Minneapolis’ 2040 Plan). People know exactly what land use changes they are getting. Opposition remains fierce in both cities, but I believe that measures favoring new apartments will prevail.

I took photos of some “monster” homes in Austin’s Zilker neighborhood that I showed to people I met (one accompanies this article). I then asked them why they would oppose similar structures of the same height and mass that were three or four units. Nearly everyone responded by saying “well, if that’s all your talking about I see your point.”

I came away from three days of talking almost nonstop about making Austin more inclusive more optimistic than ever that cities can do this. It takes grassroots mobilizing, political leadership and a clear agenda, but urban America can still expand housing for its working and middle-class.

It is a question of political will.

Randy Shaw is Editor of Beyond Chron. His new book, Generation Priced Out: Who Gets to Live in the New Urban America, will be released this week from the University of California Press.

Randy Shaw is the Editor of Beyond Chron and the Director of San Francisco’s Tenderloin Housing Clinic, which publishes Beyond Chron. Shaw is the author of four books on activism, including The Activist’s Handbook: Winning Social Change in the 21st Century, and Beyond the Fields: Cesar Chavez, the UFW and the Struggle for Justice in the 21st Century. His new book is The Tenderloin: Sex, Crime and Resistance in the Heart of San Francisco

AUSTIN — Beer isn’t the only thing coming out of the tap at one Austin brewery as it works along side another local brewery to help Austinites during the boil water notice.

Uncle Billy’s Brewery took to twitter on Tuesday letting people know they have kegs full of water available at the brewery, where citizens can come fill up their personal water containers for free.

Hey #Austin we have clean #water ready for you. @DBC_BrewingCo is loaning us kegs so we make sure we have plenty of it on hand for your needs. Bring in your empty bottles and will fill you up. Don’t forget to have a beer while you’re here. #atx pic.twitter.com/cBQoyz7CEg

— Uncle Billy’s (@UncleBillys) October 23, 2018

Uncle Billy’s brews beer for another Austin brewery, Destination Brewery, and had many of it’s kegs available. Uncle Billy’s stated "Justin Berry, founder of Destination Brewery, is a strong supporter of community initiatives and wholeheartedly backed the use of his kegs for this endeavor."

"The local craft beer community is fortunate to have massive kettles available, that allow us to brew your favorite local craft beers." stated a joint press release from the two breweries. "We felt the need to utilize our resources to assist in boiling large quantities of water to assist residents and local businesses get back to work."

The release would go on to let local residents impacted by the boil water notice know that they can fill up their personal water containers at 1530 Barton Springs Rd. Austin, TX for free.

RELATED:

Austin water quality improving, official says on day 3 of boil water notice

Unable to boil? Here’s where you can get water in the Austin area

The top questions people are asking about Austin’s boil water alert

The release also stated that if you have a restaurant, hotel, bar, or venue in need of fresh water to stay open, you can email Info@DestinationBrewing.co to coordinate a water pick up or delivery free of charge.

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Austin’s West Campus is slated to see 12 new apartment buildings open next year. That’s going to add nearly 1,500 units, or nearly 3,500 bedrooms, to the neighborhood [ + ]

Video

AUSTIN (KXAN) — Austin’s West Campus is slated to see 12 new apartment buildings open next year. That’s going to add nearly 1,500 units, or nearly 3,500 bedrooms, to the neighborhood.

While construction for those buildings progresses, a developer has proposed another new high rise. That building is going to wrap around a 2-story historic home called the Kenney House.

The design called for removing historic zoning for the Kenney House’s parking lot. The Planning and Zoning Commission voted this week to recommend that the city take that action.

"The removal of historic zoning from the parking lot will not impact the house," Steve Sadowsky, Austin’s Historic Preservation Officer, explained in an e-mail. "The applicant is proposing a 5-foot buffer around the house that will retain historic zoning."

Right now, the Kenney House is home to a bed and breakfast called the Star of Texas Inn.

The building is already surrounded by at least three ongoing construction projects within a one block radius.

Owner Chris Mackey said, "Construction brings problems. We have noise, and people sleep here. Sometimes trucks have to operate late. That doesn’t bother most people. But detours in the neighborhood can also make things tricky."

He said noise doesn’t stop people from making reservations. He does plan, however, to close his business next May, when the building’s construction is scheduled to start.

If the City Council follows the Planning and Zoning recommendation, the newest high rise will be much closer than those active projects.

"There will be approximately 19 feet between the historic house and the proposed new construction," said Sadowsky.

Mike McHone‌, who owned, restored and sold the Kenney House years ago told KXAN the house itself will be preserved and house a coffee shop.

He said the design "embraces and shows off the Kenney House on the corner."

The apartment surrounding the historic home would add 700 bedrooms to an already booming area where many students tell us the price tag is high.

"The price of housing is very expensive around West Campus," said UT Austin sophomore Inara Hauque. "A lot of students feel that way."

Peyton Janssen, General Manager at West Campus Living, helps students find apartments.

She said units still rent extremely quickly.

"This year, we started pre-leasing right around the beginning of September," Janssen said. "For example, today, I had two different groups I went with, and both of them we looked at 3 places each, and they both picked ones they wanted to go with today."

McHone said if you consider inflation, the cost of construction and other factors, average rent for West Campus hasn’t increased too much.

"In fact, I’ve got a project that’s under construction right now that I’ve worked with, the same developer on Nueces Street, and he has bedrooms, and each bedroom is for $630 a bedroom," he said. "That’s low for a single bedroom."

Janssen told us those units do exist, but those fill up extremely quickly.

On average, she said, "Typically for a studio or one bedroom, you can’t find anything for under $1,000."

It’s no secret that home prices have been on the rise in the Houston area. In the past 25 years, home price more than doubled, increasing by 155 percent, according to a study by financial technology company Smartasset.

At the same time, Smartasset’s analysis of historical home price data says buying in Houston’s housing market is a sound investment. It pegs the probability of experiencing a 5 percent price decline within a decade after buying at zero.

All this has led the company to name the Houston, Woodlands and Sugarland region one of the housing markets showing the most stable growth in the country.

Other highly ranked Texas regions included Austin, which has experienced a 243 percent increase in home price in the past 25 years, Midland (214 percent increase), Odessa (174 percent), San Angelo (144 percent) and College Station (147 percent).

It’s no secret that home prices have been on the rise in the Houston area. In the past 25 years, home price more than doubled, increasing by 155 percent, according to a study by financial technology company Smartasset.

At the same time, Smartasset’s analysis of historical home price data says buying in Houston’s housing market is a sound investment. It pegs the probability of experiencing a 5 percent price decline within a decade after buying at zero.

All this has led the company to name the Houston, Woodlands and Sugarland region one of the housing markets showing the most stable growth in the country.

Other highly ranked Texas regions included Austin, which has experienced a 243 percent increase in home price in the past 25 years, Midland (214 percent increase), Odessa (174 percent), San Angelo (144 percent) and College Station (147 percent).

Mueller, Seaholm, Colony Park and McKalla Place are vastly different places spread out across Austin.

But they have common roots as public land with a new lease on life through City Hall’s redevelopment efforts.

Mueller and Seaholm were transformed from a municipal airport and a decommissioned power plant, respectively, into mixed-use destinations. Mueller’s master developer, Catellus Development Corp., is poised to develop Colony Park in Northeast Austin into a master-planned community with thousands of homes.

And a pending deal for McKalla Place, a 24-acre tract in North Austin on the edge of The Domain, could soon give rise to a soccer stadium for Austin’s first major-league sports franchise.

So what’s next for the city’s real estate portfolio?

It’s a conversation that will linger long after this summer’s debate over Major League Soccer in North Austin fades into history because there are 13 more sites on the table.

And it’s an increasingly relevant conversation, to developers and taxpayers alike, as the city tries to use all its tools, including the dirt it owns, to address simmering issues like home unaffordability, vanishing creative space and gentrification.

“It is our obligation to make sure that our city-owned lands are used for the highest value,” Mayor Pro Tem Kathie Tovo said.

‘Highest maximum potential’

The city’s redevelopment process tends to focus on repurposing underused or decommissioned land.

"We use real estate to collaborate with the private sector to create development that results in community benefits,” said Christine Maguire, the city’s redevelopment division manager. “It’s about how real estate can leverage community benefits… and City Council strategic goals.”

She said the "North Star" guiding that effort are directives such as the 2012 Imagine Austin Comprehensive Plan.

"There’s also the real needs and aspirations of the community in real time," she said.

At this time, that means city-owned land is looked at for its potential for affordable housing, creative space for artists and health care opportunities "in areas of our city that have been traditionally ignored," Maguire said.

An Aug. 3 memo from city staff identified these four properties as the most ripe to go through the redevelopment process:

Enlarge

This Austin Energy property at 6909 Ryan Dr. — though they call it the Justin Lane tract because it’s also off that road — has access to commuter rail. It’s near where Airport Boulevard intersects with North Lamar Boulevard.

Arnold Wells / Staff

Enlarge

This site sits on more than 20 acres formerly used by a Home Depot and car dealership. It’s at 906 E. St Johns Ave. just off I-35 near its intersection with U.S. Highway 183.

Arnold Wells / Staff

Enlarge

Farther into East Austin, at 4800 Bolm Road, sits this former site of a recycling plant begging to be cycle into a new use itself.

Arnold Wells / Staff

Enlarge

Here’s another prime site in East Austin. This one, at 2201 Grove Blvd., is near Riverside Drive and just a couple of minutes away from the airport. The land that will be available is only a portion of this photo and includes some of the wooded area.

Arnold Wells / Staff

"We’re going to move [on] the first group that has the highest maximum potential," Maguire said.

Maguire cautioned there’s a lot of due diligence the city needs to perform by analyzing those sites at a "fine-tooth level" over the next several months.

"It is really doing our homework on any physical, regulatory or legal constraints on the property," she said.

‘So much opportunity to have an impact’

But that’s not all.

Local experts with the Urban Land Institute conduct research on topics relevant to affordability in Austin, such as the city’s permitting processes and employer-assisted housing. This spring, they began researching the development of affordable housing on government property.

As the subject of their study, they used five city sites that were highlighted for their development potential in a March report to Council. In addition to Justin Lane, McKalla Place and Home Depot/Chrysler, they looked at the HealthSouth building at 1215 Red River St. and the Winnebago tract at 4711 Winnebago Lane.

Paulette Gibbins, the executive director of ULI’s Austin chapter, said they wanted to analyze sites through their proximity to transportation, job opportunities and food and education options.

"For an affordable project to really be affordable, being able to have the cost of the land taken out of the equation… really makes these affordable projects happen," she said. With "building on government land there’s really so much opportunity to have an impact."

Enlarge

Paulette Gibbins is executive director of ULI Austin.

Arnold Wells/Staff

HealthSouth, a former physical rehabilitation center near the old Brackenridge hospital, was identified as the site with the highest opportunity due to its location and ability to capitalize on low-income housing tax credits.

In its March report, the city identified more long-range options, such as the One Texas Center surface parking lot at 505 Barton Springs Road or 411 Chicon, an East Austin parcel near the Plaza Saltillo MetroRail station where the city’s building services department is located.

City-owned property along RR 2222, FM 812, Johnny Morris Road and East William Cannon Drive were also floated as long-term development opportunities.

But don’t hold your breath.

"It may be a decision by the city to never let go" of those properties, Maguire said.

‘Recognize how capital looks at Austin’

The desires of area residents will play a role in the city’s deliberations.

Maguire said they want to continue community engagement work already started by some on City Council, such as Leslie Pool with the Justin Lane property and Greg Casar with Home Depot/Chrysler.

"We want to build upon that… and not supplant that great work," she said.

The site’s constraints and community feedback would be packaged into a competitive solicitation process like a request for proposals, Maguire said.

There’s a sense of urgency among city officials to redevelop city land to address affordability issues while Austin’s economy remains healthy.

Maguire said the city needs to take advantage of Austin’s "smoking hot market." Put simply, it’s relatively easy now to attract real estate interest from across the country and overseas.

Consider this: Earlier this year, for the first time, the Texas capital broke into the top 10 cities to invest in the Americas in an annual survey from CBRE Group Inc.

The report said investors are “racing to find the next Seattle by increasing their focus on the higher-yield potential of high-growth secondary markets” — and Austin is one of them. Austin tied with Toronto, Canada, as the 10th-most desirable place to invest this year.

"It’s an international city and we need to be able to recognize how capital looks at Austin," Maguire said. "We’re in a very strong position and we need maximize that strong position… particularly in places that haven’t seen that investment before."

While professional sports may not be on the horizon with other city properties, Maguire hopes community feedback and passion from the McKalla Place debate will stick around moving forward.

"I really hope that continues for every… opportunity that the city has," she said. "It’s really a challenge if nobody cares."

After the four sites outlined above, city officials have ID’d these tracts as being next in line for a revamp.

Mueller, Seaholm, Colony Park and McKalla Place are vastly different places spread out across Austin.

But they have common roots as public land with a new lease on life through City Hall’s redevelopment efforts.

Mueller and Seaholm were transformed from a municipal airport and a decommissioned power plant, respectively, into mixed-use destinations. Mueller’s master developer, Catellus Development Corp., is poised to develop Colony Park in Northeast Austin into a master-planned community with thousands of homes.

And a pending deal for McKalla Place, a 24-acre tract in North Austin on the edge of The Domain, could soon give rise to a soccer stadium for Austin’s first major-league sports franchise.

So what’s next for the city’s real estate portfolio?

It’s a conversation that will linger long after this summer’s debate over Major League Soccer in North Austin fades into history because there are 13 more sites on the table.

And it’s an increasingly relevant conversation, to developers and taxpayers alike, as the city tries to use all its tools, including the dirt it owns, to address simmering issues like home unaffordability, vanishing creative space and gentrification.

“It is our obligation to make sure that our city-owned lands are used for the highest value,” Mayor Pro Tem Kathie Tovo said.

‘Highest maximum potential’

The city’s redevelopment process tends to focus on repurposing underused or decommissioned land.

"We use real estate to collaborate with the private sector to create development that results in community benefits,” said Christine Maguire, the city’s redevelopment division manager. “It’s about how real estate can leverage community benefits… and City Council strategic goals.”

She said the "North Star" guiding that effort are directives such as the 2012 Imagine Austin Comprehensive Plan.

"There’s also the real needs and aspirations of the community in real time," she said.

At this time, that means city-owned land is looked at for its potential for affordable housing, creative space for artists and health care opportunities "in areas of our city that have been traditionally ignored," Maguire said.

An Aug. 3 memo from city staff identified these four properties as the most ripe to go through the redevelopment process:

Enlarge

This Austin Energy property at 6909 Ryan Dr. — though they call it the Justin Lane tract because it’s also off that road — has access to commuter rail. It’s near where Airport Boulevard intersects with North Lamar Boulevard.

Arnold Wells / Staff

Enlarge

This site sits on more than 20 acres formerly used by a Home Depot and car dealership. It’s at 906 E. St Johns Ave. just off I-35 near its intersection with U.S. Highway 183.

Arnold Wells / Staff

Enlarge

Farther into East Austin, at 4800 Bolm Road, sits this former site of a recycling plant begging to be cycle into a new use itself.

Arnold Wells / Staff

Enlarge

Here’s another prime site in East Austin. This one, at 2201 Grove Blvd., is near Riverside Drive and just a couple of minutes away from the airport. The land that will be available is only a portion of this photo and includes some of the wooded area.

Arnold Wells / Staff

"We’re going to move [on] the first group that has the highest maximum potential," Maguire said.

Maguire cautioned there’s a lot of due diligence the city needs to perform by analyzing those sites at a "fine-tooth level" over the next several months.

"It is really doing our homework on any physical, regulatory or legal constraints on the property," she said.

‘So much opportunity to have an impact’

But that’s not all.

Local experts with the Urban Land Institute conduct research on topics relevant to affordability in Austin, such as the city’s permitting processes and employer-assisted housing. This spring, they began researching the development of affordable housing on government property.

As the subject of their study, they used five city sites that were highlighted for their development potential in a March report to Council. In addition to Justin Lane, McKalla Place and Home Depot/Chrysler, they looked at the HealthSouth building at 1215 Red River St. and the Winnebago tract at 4711 Winnebago Lane.

Paulette Gibbins, the executive director of ULI’s Austin chapter, said they wanted to analyze sites through their proximity to transportation, job opportunities and food and education options.

"For an affordable project to really be affordable, being able to have the cost of the land taken out of the equation… really makes these affordable projects happen," she said. With "building on government land there’s really so much opportunity to have an impact."

Enlarge

Paulette Gibbins is executive director of ULI Austin.

Arnold Wells/Staff

HealthSouth, a former physical rehabilitation center near the old Brackenridge hospital, was identified as the site with the highest opportunity due to its location and ability to capitalize on low-income housing tax credits.

In its March report, the city identified more long-range options, such as the One Texas Center surface parking lot at 505 Barton Springs Road or 411 Chicon, an East Austin parcel near the Plaza Saltillo MetroRail station where the city’s building services department is located.

City-owned property along RR 2222, FM 812, Johnny Morris Road and East William Cannon Drive were also floated as long-term development opportunities.

But don’t hold your breath.

"It may be a decision by the city to never let go" of those properties, Maguire said.

‘Recognize how capital looks at Austin’

The desires of area residents will play a role in the city’s deliberations.

Maguire said they want to continue community engagement work already started by some on City Council, such as Leslie Pool with the Justin Lane property and Greg Casar with Home Depot/Chrysler.

"We want to build upon that… and not supplant that great work," she said.

The site’s constraints and community feedback would be packaged into a competitive solicitation process like a request for proposals, Maguire said.

There’s a sense of urgency among city officials to redevelop city land to address affordability issues while Austin’s economy remains healthy.

Maguire said the city needs to take advantage of Austin’s "smoking hot market." Put simply, it’s relatively easy now to attract real estate interest from across the country and overseas.

Consider this: Earlier this year, for the first time, the Texas capital broke into the top 10 cities to invest in the Americas in an annual survey from CBRE Group Inc.

The report said investors are “racing to find the next Seattle by increasing their focus on the higher-yield potential of high-growth secondary markets” — and Austin is one of them. Austin tied with Toronto, Canada, as the 10th-most desirable place to invest this year.

"It’s an international city and we need to be able to recognize how capital looks at Austin," Maguire said. "We’re in a very strong position and we need maximize that strong position… particularly in places that haven’t seen that investment before."

While professional sports may not be on the horizon with other city properties, Maguire hopes community feedback and passion from the McKalla Place debate will stick around moving forward.

"I really hope that continues for every… opportunity that the city has," she said. "It’s really a challenge if nobody cares."

After the four sites outlined above, city officials have ID’d these tracts as being next in line for a revamp.

The Japanese restaurant Fukumoto is located on the ground floor of Corazon, an apartment building in downtown Austin that’s now leasing nearly a quarter of its units as short-term rentals. RICARDO B. BRAZZIELL / AMERICAN-STATESMAN

At Corazon, a trendy 2014 complex on the east side of Interstate 35, a studio apartment runs $1,600 a month — or $170 a night. You can live at The Arnold, built in 2016, for $2,000 a month or stay one night for $229.

Are these apartment complexes? Or hotels?

Many of the newer, nicer apartment complexes cropping up across Austin’s landscape share a new trait. They’re licensing chunks of units as short-term rentals to be furnished and leased by the night, just like hotel rooms.

Corazon, for example, on East Fifth Street, has 62 of its 256 units — 24 percent — licensed as STRs. The Arnold, on East Sixth Street, has 20 short-term units. Lamar Union, near the Alamo Drafthouse Cinema on South Lamar, has 20 such units, and two downtown Amli complexes, on either side of the W Hotel, have a combined 57.

“That’s wild,” said longtime real estate developer Ed Wendler when told about the numbers. “That could start impacting the rental market if it’s that large a number.”

Until the rise of such websites as Airbnb and Austin-based Homeaway, such rentals were generally limited to corporate apartments, perhaps near an industrial or medical district, that occasionally housed a company’s employees. Now, tourists and everyday business travelers are getting in on the idea of nixing hotel rooms for a more residential stay. Austin ordinances allow apartment buildings to license up to a quarter of their units as STRs.

When Taylor Fletcher, a 28-year-old Park City, Utah, resident, came to Austin to attend a wedding with his girlfriend and her family, they didn’t stay at a downtown hotel or at the wedding venue hotel on South Congress. Instead, they stayed next door to a hotel at The Catherine, a luxury high-rise apartment complex, where they had multiple bedrooms surrounding a full kitchen.

Fletcher, an Olympic skier who competed at the Pyeongchang Games this past February, spends much of his life traveling for competitions, particularly in northern Europe. He and his U.S. teammates usually stay in apartments instead of hotels.

“If I could do it everywhere, I would,” Fletcher said. “You have a kitchen. You’re not crammed into a hotel room. The people living there might know that we’re renters, but we don’t know that they’re not.”

Catering to tourists

Two years ago, Brian Carrico and Chris Herndon tapped into the desire of travelers to expand their lodging options when they founded The Guild, a “collection of boutique hotels located in upscale residential buildings,” according to its website.

The company has 170 units spread across eight Austin buildings, including those at Corazon, Amli and The Arnold. It now has 35 units in Dallas, as well. The company caters to “people who want to be more a part of the city, rather than a traditional hotel,” Carrico said in an interview.

“We try to find interesting places to locate,” he said. “Our neighborhood guides prioritize getting guests out of the rooms and into local businesses.”

The company relies on the apartment buildings to decide how many units to set aside as hotel rooms, based on how many units they might typically have vacant at a given time. The Guild leases the unit from the complex at a set per-month price (Carrico called those “comparable” to normal leasing prices) and then furnishes, licenses and rents the units.

“This is becoming more and more common as a form of mixed-use,” Carrico said. “There’s a pretty clear demand for this kind of combination. A lot of travelers want a living room and kitchen and want to be located in a community.”

Even apartment complexes where short-term renting has traditionally been disallowed by lease provisions are starting to loosen their rental provisions.

The Grove, a South Austin apartment complex where the monthly rent for a one- or two-bedroom unit ranges from $1,300 to $1,600, recently became the first Austin complex to partner directly with Airbnb via a program called Pillow. An email to residents last month stated that the program would allow them to rent their apartments as STRs, so long as the complex gets a 25 percent cut.

In exchange, Airbnb agreed to purge all non-approved listings at The Grove from its website.

Pillow, which partners with apartment owners to encourage residents to host rental guests at their complexes, lists 63 apartment complexes nationwide that have joined the partnership. The Grove’s email and the Pillow sign-up page say nothing about the city’s licensing of short-term rentals, nor do they appear to limit the number of days a lessee can rent out his apartment.

Representatives of the apartment complex’s parent company, BH Management, did not return calls for comment.

Assessing ‘a game-changer’

As the practice of merging apartments and vacation-style rentals spreads, what does it mean for cities and their residents?

That’s a question real estate watchers are still trying to answer. Anne Talbert, an apartment trends researcher with Austin Investor Interests, said the trend is recent and the group hasn’t uncovered much information about its impact yet, but the development is on its radar.

“Your line of questioning is exactly what I want to ask: What is the impact of this and how is it impacting rent?” Talbert said. “It’s definitely a game-changer. It’s a trend we want to get our eye on.”

Austin’s apartment occupancy rates, now at 92 percent, are expected to rise to 95 percent by 2022, city staffers informed the City Council on Wednesday. The metro area is expected to need 114,000 new apartments by 2030 to meet demand.

In regard to impacts on rents and apartment availability, Carrico noted that The Guild locates only in buildings that already are expensive.

“We’re exclusively in what would be considered luxury apartments so it’s a segment that tends to have higher vacancies,” he said.

Charles Heimsath, president of the real estate research firm Capitol Market Research, said that apartments didn’t rent to tourists five, 10, 20 years ago because websites like Airbnb and Homeaway hadn’t boomed yet. Now, he knows various apartment developers who are planning to include short-term units.

“It just makes sense,” Heimsath said. “Apartment developers are concerned about the bottom line. As taxes continue to increase and operating expenses continue to go up, they try to offset those increasing expenses with additional line items of rental income.”

Tom Noonan, president of Visit Austin, the convention and visitors bureau, sent an email to city officials earlier this year warning that the hotel market in Austin is flattening as growth slows and occupancy levels drop. He said in an interview last month that short-term rentals have helped absorb a spike in travelers to the city, especially during major festivals, but STRs also play a role in slowing hotel occupancy growth.

“We’ve added so many rooms to the marketplace that it’s had an impact,” he said. “Austin is the largest short-term rental market in the state of Texas … Obviously hotels are impacted by the number of short-term rentals in the city because they’re all competing for room nights.”

ABOUT THIS SERIES

This story is the last of three looking at the booming short-term rental market in Austin and the challenges associated with it.

The opening story described how as lawsuits target local rules regarding short-term rentals, property owners complain about a balky licensing process and occasionally resort to subterfuge as they attempt to avoid citations.

As lawsuits target local rules regarding short-term rentals, property owners complain about a balky licensing process and occasionally resort to subterfuge as they attempt to avoid citations.

On Tuesday, American-Statesman reporter Elizabeth Findell will look at how many of the upscale apartment complexes popping up in Austin share an interesting trait. They are licensing chunks of units as short-term rentals to be furnished and leased by the night, just like hotel rooms.

Online: Dive into an interactive, citywide map that spotlights trouble spots within Austin’s short-term rental landscape. You’ll find it with this story at mystatesman.com.

The Japanese restaurant Fukumoto is located on the ground floor of Corazon, an apartment building in downtown Austin that’s now leasing nearly a quarter of its units as short-term rentals. RICARDO B. BRAZZIELL / AMERICAN-STATESMAN

At Corazon, a trendy 2014 complex on the east side of Interstate 35, a studio apartment runs $1,600 a month — or $170 a night. You can live at The Arnold, built in 2016, for $2,000 a month or stay one night for $229.

Are these apartment complexes? Or hotels?

Many of the newer, nicer apartment complexes cropping up across Austin’s landscape share a new trait. They’re licensing chunks of units as short-term rentals to be furnished and leased by the night, just like hotel rooms.

Corazon, for example, on East Fifth Street, has 62 of its 256 units — 24 percent — licensed as STRs. The Arnold, on East Sixth Street, has 20 short-term units. Lamar Union, near the Alamo Drafthouse Cinema on South Lamar, has 20 such units, and two downtown Amli complexes, on either side of the W Hotel, have a combined 57.

“That’s wild,” said longtime real estate developer Ed Wendler when told about the numbers. “That could start impacting the rental market if it’s that large a number.”

Until the rise of such websites as Airbnb and Austin-based Homeaway, such rentals were generally limited to corporate apartments, perhaps near an industrial or medical district, that occasionally housed a company’s employees. Now, tourists and everyday business travelers are getting in on the idea of nixing hotel rooms for a more residential stay. Austin ordinances allow apartment buildings to license up to a quarter of their units as STRs.

When Taylor Fletcher, a 28-year-old Park City, Utah, resident, came to Austin to attend a wedding with his girlfriend and her family, they didn’t stay at a downtown hotel or at the wedding venue hotel on South Congress. Instead, they stayed next door to a hotel at The Catherine, a luxury high-rise apartment complex, where they had multiple bedrooms surrounding a full kitchen.

Fletcher, an Olympic skier who competed at the Pyeongchang Games this past February, spends much of his life traveling for competitions, particularly in northern Europe. He and his U.S. teammates usually stay in apartments instead of hotels.

“If I could do it everywhere, I would,” Fletcher said. “You have a kitchen. You’re not crammed into a hotel room. The people living there might know that we’re renters, but we don’t know that they’re not.”

Catering to tourists

Two years ago, Brian Carrico and Chris Herndon tapped into the desire of travelers to expand their lodging options when they founded The Guild, a “collection of boutique hotels located in upscale residential buildings,” according to its website.

The company has 170 units spread across eight Austin buildings, including those at Corazon, Amli and The Arnold. It now has 35 units in Dallas, as well. The company caters to “people who want to be more a part of the city, rather than a traditional hotel,” Carrico said in an interview.

“We try to find interesting places to locate,” he said. “Our neighborhood guides prioritize getting guests out of the rooms and into local businesses.”

The company relies on the apartment buildings to decide how many units to set aside as hotel rooms, based on how many units they might typically have vacant at a given time. The Guild leases the unit from the complex at a set per-month price (Carrico called those “comparable” to normal leasing prices) and then furnishes, licenses and rents the units.

“This is becoming more and more common as a form of mixed-use,” Carrico said. “There’s a pretty clear demand for this kind of combination. A lot of travelers want a living room and kitchen and want to be located in a community.”

Even apartment complexes where short-term renting has traditionally been disallowed by lease provisions are starting to loosen their rental provisions.

The Grove, a South Austin apartment complex where the monthly rent for a one- or two-bedroom unit ranges from $1,300 to $1,600, recently became the first Austin complex to partner directly with Airbnb via a program called Pillow. An email to residents last month stated that the program would allow them to rent their apartments as STRs, so long as the complex gets a 25 percent cut.

In exchange, Airbnb agreed to purge all non-approved listings at The Grove from its website.

Pillow, which partners with apartment owners to encourage residents to host rental guests at their complexes, lists 63 apartment complexes nationwide that have joined the partnership. The Grove’s email and the Pillow sign-up page say nothing about the city’s licensing of short-term rentals, nor do they appear to limit the number of days a lessee can rent out his apartment.

Representatives of the apartment complex’s parent company, BH Management, did not return calls for comment.

Assessing ‘a game-changer’

As the practice of merging apartments and vacation-style rentals spreads, what does it mean for cities and their residents?

That’s a question real estate watchers are still trying to answer. Anne Talbert, an apartment trends researcher with Austin Investor Interests, said the trend is recent and the group hasn’t uncovered much information about its impact yet, but the development is on its radar.

“Your line of questioning is exactly what I want to ask: What is the impact of this and how is it impacting rent?” Talbert said. “It’s definitely a game-changer. It’s a trend we want to get our eye on.”

Austin’s apartment occupancy rates, now at 92 percent, are expected to rise to 95 percent by 2022, city staffers informed the City Council on Wednesday. The metro area is expected to need 114,000 new apartments by 2030 to meet demand.

In regard to impacts on rents and apartment availability, Carrico noted that The Guild locates only in buildings that already are expensive.

“We’re exclusively in what would be considered luxury apartments so it’s a segment that tends to have higher vacancies,” he said.

Charles Heimsath, president of the real estate research firm Capitol Market Research, said that apartments didn’t rent to tourists five, 10, 20 years ago because websites like Airbnb and Homeaway hadn’t boomed yet. Now, he knows various apartment developers who are planning to include short-term units.

“It just makes sense,” Heimsath said. “Apartment developers are concerned about the bottom line. As taxes continue to increase and operating expenses continue to go up, they try to offset those increasing expenses with additional line items of rental income.”

Tom Noonan, president of Visit Austin, the convention and visitors bureau, sent an email to city officials earlier this year warning that the hotel market in Austin is flattening as growth slows and occupancy levels drop. He said in an interview last month that short-term rentals have helped absorb a spike in travelers to the city, especially during major festivals, but STRs also play a role in slowing hotel occupancy growth.

“We’ve added so many rooms to the marketplace that it’s had an impact,” he said. “Austin is the largest short-term rental market in the state of Texas … Obviously hotels are impacted by the number of short-term rentals in the city because they’re all competing for room nights.”

ABOUT THIS SERIES

This story is the last of three looking at the booming short-term rental market in Austin and the challenges associated with it.

The opening story described how as lawsuits target local rules regarding short-term rentals, property owners complain about a balky licensing process and occasionally resort to subterfuge as they attempt to avoid citations.

As lawsuits target local rules regarding short-term rentals, property owners complain about a balky licensing process and occasionally resort to subterfuge as they attempt to avoid citations.

On Tuesday, American-Statesman reporter Elizabeth Findell will look at how many of the upscale apartment complexes popping up in Austin share an interesting trait. They are licensing chunks of units as short-term rentals to be furnished and leased by the night, just like hotel rooms.

Online: Dive into an interactive, citywide map that spotlights trouble spots within Austin’s short-term rental landscape. You’ll find it with this story at mystatesman.com.